Financial Incentives - Commission 1.4.4

Commission - based on the percentage of business generated by an employee such as a salesperson. Commission is a payment made to employees based on the value of sales achieved.

KEY FEATURES

• An incentive to increase worker productivity
• Knowing that extra effort means more pay can motivate
• Depends on selling price of product

ADVANTAGES

•  Enables high performing sales people to earn huge amounts.
•  The payroll cost is related to the value of business achieved rather than just the amount produced.
• Increased sales due to it being a motivator

DISADVANTAGES

• No incentive to build relations with customers
• Income can be unreliable, especially in a recession
• May lose customers if employees are using aggressive sales techniques in order to secure commission which damages the business' reputation